Canada’s two Pacific Coast ports have an aggressive growth strategy focused on two markets, but neither of those markets happen to be in Canada.
The ports of Vancouver and Prince Rupert, British Columbia, leveraging their naturally deep harbors and rapid transit times from Asia to the U.S. Midwest, are engaged in a heated battle with U.S. West Coast ports for market share in booming trade with the Far East.
Vancouver and newcomer Prince Rupert, about 500 miles to the north, already have a lock on Canada trade. The Canadian ports still have work to do, however, to convince U.S. importers that shipping through Canada is a superior logistics strategy for reaching the large consumer markets and industrial producers in Chicago, Detroit and the Ohio Valley.
Canada’s plan for attracting the business of big box retailers and large direct imports, most of which are based in the U.S., is to make its Pacific ports the most efficient and reliable gateways for serving the northern tier of the U.S.
What officials there call Canada’s Pacific Gateway is a formal program in which the ports, in cooperation with the Canadian National and Canadian Pacific railroads and the federal, provincial and local governments, invest in the infrastructure and operating processes needed to drive efficiency through distribution channels.
“You take the strategic geographic advantages and you invest in the product,” Stockwell Day, Canada’s minister for the Asia-Pacific Gateway, told reporters last month.
|Canada’s prosperity is linked to its trade with Asia, Day said, and its Pacific Coast ports are overwhelmingly dependent on Asia-Pacific trade. But Canada offers a relatively small market of 33 million, compared with the U.S. population of 310 million, so future growth at the ports depends on making the sites channels into the U.S. market.
With direct intermodal service of about 100 hours to Chicago, Vancouver and Prince Rupert offer inland transit times similar to the services provided by the Union Pacific and BNSF railroads from U.S. West Coast ports. Because ocean services from Asia to the Canadian ports are one to three days faster via the Great Circle route, Prince Rupert and Vancouver have an all-in transit time advantage to the U.S. heartland, provided the intermodal handoff at the ports is efficient.
That’s where the Pacific Gateway strategy comes into play.
To ensure efficient port-to-rail-to-destination service, Canada’s Pacific Gateway initiative identified 47 infrastructure projects with a total cost of $3.5 billion needed to optimize the Vancouver and Prince Rupert gateways. The federal government will contribute $1.5 billion of that, Day said.
Canada as a whole emerged quite well from the global economic and trade recession. The country didn’t see anything close to the downturn that hit the U.S. economy. GDP increased 3.1 percent in 2010, and the International Monetary Fund projects the economy will grow 2.7 percent this year.
Port Metro Vancouver last year handled a record 2.5 million TEUs, up 17 percent over 2009. It now is the third-largest container port on the North American west coast, after Los Angeles and Long Beach. Prince Rupert also established a new record with 343,366 TEUs, up 29.5 percent over 2009.
Vancouver, with a metropolitan area population of 2 million, generates local as well as through cargo. Alix Li, account services manager for trade development, said the port is developing a robust warehouse and transloading sector that provides value-added jobs and services at the port complex. And when the imported containers are transloaded into domestic boxes, the empty marine containers are available for exporters in the region, Li said.
This has helped Vancouver achieve a balance between imports and exports, a plus for ocean carriers as they seek to fill their vessels in both directions. Vancouver handles the typical higher-value, time-sensitive imports that move through the west coast of North America, including electronic goods, apparel and automotive parts.
The key to the efficient handling of time-sensitive merchandise is to keep container dwell time at the ports to a minimum.
Container dwell time at the modern Deltaport terminal, operated by TSI Terminal Systems, averages less than three days, although efforts are under way to get the average dwell time closer to two days, said Michael Baker, operations manager. Truck turnaround times average 31 minutes gate-in to gate-out, he said.
As container volume increases, terminal operators are finding they no longer can handle all of the traffic in a normal 8 a.m.-to-5 p.m., five-day workweek. TSI also runs night gates three times a week, and will offer special weekend gates during busy periods, Baker said.
Deltaport is the largest terminal at Port Metro Vancouver, handling approximately 873,000 TEUs annually. The other container-handling facilities at Port Metro Vancouver are Vanterm, Centerm and Fraser Surrey Docks. Vancouver also handles various dry and liquid bulk products, lumber and breakbulk cargoes.
Lumber and wood products exports are increasing as demand grows in Asia. Western Canada is a major producer of wood products.
In addition to large volumes of grain exports at its bulk facilities, Vancouver is seeing growing trade in specialized grains moving in containers, Li said. The port projects containerized grain, which now accounts for 16 percent of total grain exports, will increase to 21 percent by 2015.
Vancouver in its present configuration has a design capacity of 3.7 million TEUs a year, which is sufficient to handle 2.5 million TEUs now. The port plans to double that capacity by 2020.
That will be needed if Vancouver succeeds in increasing its reach into the U.S. market. Only 5 to 6 percent of Vancouver’s total container volume now moves to the U.S., and most of that volume is destined for the Chicago area.
Terminal operators at the Canadian ports are working closely with CP and CN to streamline the handoff of containers to double-stack trains. All the terminals have on-dock rail transfer yards. CP and CN have a co-production agreement in which the locomotives of both railroads serve different sections of the port complex while providing total coverage for both carriers. This helps to avoid congestion in the harbor area.
The railroads also have a unique arrangement for North America in that they have signed level-of-service agreements with the marine terminals. The parties share real-time information on container locations and availability and measure performance daily. These agreements, which are less than a year old, already have resulted in noticeable improvements in train velocity, the railroads say, and have helped both operators zero in on what they call “glowing boxes” — those that have dwell times exceeding three days.
Prince Rupert, which is closer to Alaska than it is to the lower 48 states, is a shining example of a port designed with no local market. The port for years handled forest products, grain and breakbulk products, but no containers.
The tiny town of about 10,000 embraced the Fairview Container Terminal when it opened in late 2007, said Maynard Angus, manager of public affairs. Prince Rupert is the type of town where the children of longshoremen and shipping executives attend the same school and their parents coach the sports teams.
The Fairview terminal was built on the site of a former breakbulk facility that had fallen on hard times. With government support, the Prince Rupert Port Authority, U.S. terminal operator Maher Terminals of New Jersey and CN railroad assumed a “build it and they will come” strategy, and it has worked.
The container operation began with one weekly service by China Ocean Shipping Co. and its CKYH partners — “K” Line, Yang Ming and Hanjin Shipping. Container volumes grew at a strong double-digit pace annually, and Cosco added a second weekly service. The facility handled 343,366 TEUs last year, up 29.5 percent over 2009.
Prince Rupert continues to amaze the container shipping industry, including its local supporters. With Vancouver controlling the Canadian market, Prince Rupert executives assumed their port would serve only the U.S. Midwest, largely in a one-way trade of loaded import containers moving into the U.S. and empty containers returning for repositioning in Asia.
Today, about a third of the imports move to eastern Canada, a third to Chicago and the rest to Memphis along CN’s network. The CN line actually extends to New Orleans, and CN serves destinations east of Chicago by interlining with U.S. railroads.
Exporters also have found Prince Rupert to be an efficient gateway to the Pacific Rim, and what started as a one-way import trade is seeing steady growth in exports of agricultural, mining and forest products. About 75 percent of Prince Rupert’s container volume is imports and 25 percent is exports.
Rail is still the dominant mode of inland transport, with Maher Terminals and CN operating an efficient intermodal handoff at the on-dock railyard. The track is less than 200 yards from the berth.
Maher runs a stacked container operation at Fairview on what most U.S. West Coast ports would consider a small footprint of 59 acres. The single-berth facility has a design capacity of approximately 500,000 TEUs a year, so it’s operating at about 70 percent of capacity barely three years after it opened.
Prince Rupert may add a second berth, which would increase capacity at the existing facility by about 250,000 TEUs. A second phase would bring the port’s annual capacity to 2 million TEUs.
But the expansion plans depend on Prince Rupert attracting additional services. Cosco continues to increase its business. Last year, it upgraded one of its vessel strings to 7,500-TEU ships. Water depth is no concern because Fairview can handle 12,000-TEU vessels at berth.
Two services, however, aren’t enough to warrant a costly expansion of the terminal, and Prince Rupert managers say they hope to announce a new container service at the port by midyear. They would not say if that will come from Cosco or another shipping line.
Although Prince Rupert has attracted steady interest from ocean carriers and shippers, many businesses have been sitting on the sidelines waiting to see if the port could handle containers efficiently and if the harsh winters of northern British Columbia would hamper the reliability of CN’s intermodal service, Angus said.
Now that Prince Rupert has proved itself, the inquiries are turning into vessel bookings and will eventually result in additional liner services, he said.
Contact Bill Mongelluzzo at email@example.com.